Sales fall threatens Matalan's prospects

DISCOUNT retailer Matalan piled on the gloom for the retail sector today as it revealed a sharp fall in sales in March and April.

Chief executive John King warned that unless trading conditions improve, full-year profits will fall to the bottom end of market expectations.

Matalan also announced the sale of its loss-making Lee Cooper jeans business for £30m. It is being bought by Emerisque Capital, a London-based private-equity firm.

The business had been on the market since last October. Matalan will retain the rights to UK distribution of the Lee Cooper brand.

Hit by the consumer spending slowdown, like-for-like sales at the group have fallen by 8.8% in the nine weeks to 30 April, although King pointed to a 2.1% improvement in margins.

He also said the figure had been affected by the timing of the group's mailshots to customers and the scaling-down of its mid-season sale as it cuts back on discounting.

Excluding those factors, the underlying fall in sales was around 5%, he said.

'We normally see an uplift in sales in March, but it hasn't happened yet,' he said. 'But even if there is no improvement for the rest of the year, we will still come in at the lower end of market expectations.' These range from £85m to £100m.

The poor trading figures took the shine off a 31% jump in profits to £83.5m for the year to 26 February, excluding a £27.3m writedown on the Lee Cooper disposal.